Yes, most certainly! There are a few lakes, rivers, and ponds within the City limits as well as out in the Outlands.

The waters surrounding the island are mostly controlled by the United Earth and policed by the Masked, but not intensively (you could find, say, a beach and have it be relatively safe and free of patrolling police -- but if you swam out into the water and came up on the shore of the United Earth you'd get a face full of militia)!