I doubt it was for water supply reasons. Public water supplies with surface water sources are basically required to have filtration capable of removing giardia and have been for 15 to 20 years. Like the AMC had to do with the huts, many water supplies were converted to wells or installed slow sand filtration systems.
Sometimes beavers are their own worse enemies, unless they can continue to raise the water level, sediment fills in behind the dam and can lead to inadequate winter water depth under the ice. Once they get frozen in the lodge, they starve. Frequently, they end up having to build longer and longer dams and it doesn't take much for heavy rain event to cause a dam to fail. The former pond will grow up quickly with some beaver "candy" (tasty young trees) and give it a few years and a new colony will be reestablished.