I see you are in MA, below is some State specific info from an attorney that works on these type of cases. Please do what you can to remove this dog from your street. It takes a special person to own and train a pit bull, it seems like your neighbor is not that type of person. If I had a dog that killed anyone's pet I would be doing what ever I could to pay and take care of things.
Injury Law Center®: Massachusetts Dog Bite & Animal Attack Attorneys