Your neighbors' cats are interfering with your ability to enjoy watching birds in your yard, so to me it's pretty simple: they find a way to keep their cats out of your yard, or they agree to put bibs on them every time they're out
Placing the feeder in an open area might give the birds more of a chance to escape (i.e. far away from shrubs where the cats could hide), but it'll make it harder for them to escape from birds of prey.
I had one of these in my back yard for most of the summer, aimed right where cats would land if they jumped over my fence near where I feed the birds. I think it helped a lot.
http://www.homedepot.com/p/Hav...
