This from Wikipedia on the background to the story:
Mayor Fred Eaton lobbied Theodore Roosevelt and got the local irrigation system cancelled. William Mulholland misled residents of the Owens Valley, by claiming that Los Angeles would take water only for domestic purposes, not for irrigation]. By 1905, through purchases and bribery, Los Angeles purchased enough water rights to enable the aqueduct. Many argue that Los Angeles paid an unfair price to the farmers of Owens Valley for their land. Farmers that resisted the pressure from Los Angeles until 1930 received the highest price for their land; most farmers sold their land from 1905 to 1925, and received less than Los Angeles was actually willing to pay. However, the sale of their land brought the farmers substantially more income than if they had kept the land for farming and ranching. None of the sales were made under threat of eminent domain.
The aqueduct was sold to the citizens of Los Angeles as vital to the growth of the city. However, unknown to the public, the initial water would be used to irrigate the San Fernando Valley to the north, which was not at the time a part of the city. A syndicate of investors (again, close friends of Eaton, including Harrison Grey Otis) bought up large tracts of land in the San Fernando Valley with this inside information. This syndicate made substantial efforts to the passage of the bond issue that funded the aqueduct, including creating a false drought (by manipulating rainfall totals) and publishing scare articles in the Los Angeles Times, which Otis published.
As the video documentary and the article note, when the water was brought into Los Angeles the aquifer stopped just north west of the city center, in a then-remote and dry region called the San Fernando Valley.
In order for Los Angleanos to get at the water the people needed, it became imperative that the city council annex the valley into the city. This created a bonanza for the large landowners who had recently purchased land sub rosa for a fraction of the cost of what the land would be worth had the original owners knew the full plans of William Mullholland and his friends.
The story was retold in 1974 by Roman Polanski and screenwriter Robert Towne for the movie "Chinatown". Now an American classic, it features the same events of the "Water Wars" only transported thirty years ahead in time to make the story work in the Los Angeles of crime novelists Raymond Chandler and James M. Cain. John Huston plays millionaire Noah Cross, a thinly veiled version of Mulholland, with an added twist of utter depravity.