You could attempt to create a raised terrain by raising up a small part of the terrain and then use the flatten terrain brush to paint across your entire editable area from that exact raised portion. This tool will generally raise all trees, grass and entities to the base line of where you initialize your flatten point - so you dont lose the structure of your town.
After that you can use the lower terrain tool brush to create a small oasis hole. Then you can safely raise your water height. (by clicking the mountain icon to the left and then going to the right of screen and open the water tab). You'll see the water height option there.
My recommendation after all that would be to create a soft slope on the edge of your editable area to blend the 0 height of the terrain outside of your editable area to the raised height of your editable area terrain height. You should then consider making different types of creative barriers to prevent the player from getting too close to the slopes. Better to even obscure the view. You can use rocks or a dense fog that uses a high orange/yellow hue. Whatever color matches your terrain/skybox. I'm assume something that looks more like a dessert.
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i7 -2600 CPU @ 3.40GHz - Windows 7 - 8GB RAM - Nivida GeForce GTX 960