Not a big deal. Meet with the city, let this nutjob talk himself into a hole. Unless this guy has some pull with your city council or there is a big anti-runner sentiment where you live it's going to be real hard for him to put forth any kind of winning argument. The council will listen to him, maybe ask your group a few questions, then brush him off and move onto the next bit of business.
The legal view of "running on the roads" has various meanings depending on the circumstance (biking on the roads, same thing). In some places it may not be legal. I can think of 2 places fairly close to where I live where bikes/pedestrians are banned even though when I drive those roads they look fairly typical to roads that you would expect to be able to run or bike on (i.e. they're definitely not interstate highway type roads).
One thing I gotta say, I do not understand why runners train in the street when lightly traveled sidewalks (in good shape) are present. I can understand running in the street if you're in an area where the sidewalks are either crowded or poorly maintained. Example, where I live there is one main road to get from the north end of the city to downtown, it's about 4 miles and has lightly traveled sidewalks on both sides the whole way. At some points it's 2 lanes for cars in each direction, but mostly it's 1 lane for cars in each direction. Mostly it's not a super wide road. In 25 years running on that road I've never felt the need to run anywhere but the sidewalk. At least once a week I see somebody running in the street - experienced runners and newbies. I don't get it. Once somebody told me they ran in the street because it was softer than the sidewalk and saved their legs. Seriously? We're talking asphalt vs concrete, not feathers vs concrete.
Are you saying your running group (or a lot of your local runners) deliberately runs in the street as opposed to on the sidewalk in this guy's neighborhood?