Does anyone know the name of a movie about two groups of boys, one a bullying gang, where a boy saves the life of another in the cesspool of a water tower? I saw it about 15 years ago and can't recall the name.

That's the 1994 movie "The War." Read the full synopsis at the Internet Movie Database: http://www.imdb.com/title/tt0111667/synopsis

In one scene, a group of kids (Billy and friends) challenges another group (Stu and friends) to see who can swim across the water tower as it drains; the winners get to keep a tree-fort that both groups want. In the scene you mentioned, a few days later, Billy falls into the water tower and starts to drown, so Stu jumps in and manages to save him.