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The zoning code does not define what a structure is. You could argue that the wall is a structure and not a fence and it would be up to the zoning board to determine if they are in violation. The neighbor could argue that the wall is not a structure. Below is the only reference to a defition for structure and it tends to be in your favor that the wall is a structure and must be 5 feet from the property line. Also if the wall is a retaining wall, your interpretation is more reasonable because it is not being used as a fence, it is being used as a structure to hold back the dirt.
Sec. 146-1. Definitions. A. Whenever the words "dwelling," "dwelling unit," "rooming house," "rooming unit," "hotel," "hotel unit," "premises" and "structure" are used in this chapter, they shall be construed as if they were followed by the words "or any part thereof."
B. Except as otherwise provided, the following definitions shall apply in the interpretation and enforcement of this chapter:
Accessory structure. A detached structure which is not used or intended to be used for living or sleeping by human occupants and which is located on the same premises with a dwelling.