Fence options

I have a unique? Situation, it seems like. I cant find much info on what to do, so i have a dog who cannot and has not scaled a 6ft fence. However he recently discovered he doesnt have to, because my backyard is 2 levels so half is about 4 ft higher than the other half and also the rest of the yards, therefore the existing 6ft fence built on the lower part and up along the slope, meets the higher ground halfway up and ultimately results in only about a 3ft height fence about 1½ ft back from the ground. So a slight forward leap and hes chasing squirrels all the way to dog heaven. Much to my neighbors dismay because my dog is now stuck and this latest time it happened my neighbor refused to give my dog back. I need to build up somehow or maybe build a secondary fence on the higher ground? Im not sure whats best. For reference my local ordinance states fences can be 7ft with a permit and i can build a new fence up to 7ft without a permit as well. What would be most economical in this situation?