The responses on this topic really display the wide range of parenting approaches. I, too, would be disappointed to have anything on my property (including pumpkins or a snowman) destroyed or vandalized. And hearing that the child’s own parents observed the event is just disheartening. Some responders, like Carolyn, seem to be okay with this.
Even as toddlers, I expect nothing less of my children than to respect other people – and that includes other people’s property. Just because there is no financial damage does not mean that the act wasn’t ugly or mean-spirited. And I do not wish to raise mean-spirited children. That’s my choice. Unfortunately, other parents may not feel this is a priority.
I agree with many of the other posters -- your reaction to the event in front of your children will be the key. I recommend not sharing your personal thoughts about how wrong the world can be, and instead be matter-of-fact about it so that your children can learn about the world in a healthy way. “Wow. That wasn’t very nice, was it? I wonder why someone would do such a thing?” And, yep…I guess you’ll have to build your future creations in the backyard to avoid the nasty actions of others. But even that will be a nice problem-solving lesson that your children will learn.
Without a doubt, I would privately contact the parents of the child, let them know another neighbor (don't name names) saw the event and ask if something is going on. They will probably be defensive...but give them the benefit of the doubt. Don't confront or get angry -- just let them know that you know it happened and you were quite surprised by it.