Two good books are Diane Galusha's Liquid Assets: A History of New York City's Water System (1999) and Gerard T. Koeppel's Water for Gotham: A History (2001).
Champagne? To me, it doesn't taste like champagne. (I get no kick from champagne.) But whenever I go to a restaurant, tap water is just fine.
25 November 1979, New York Times, pg. SM32+:
To add Hudson River water to New York's present supply is to degrade one of the few city assets that have remained in prime condition over the years. It would be like diluting champagne with root beer.
11 June 1984, New York Times, pg. A1:
"Perhaps, like fine wine, our water doesn't travel well," said Joseph T. McGough Jr., the city Environmental Protection Commissioner. "We're generally regarded as having a superior water supply, and on any given day a test like this could turn out differently."
(Pg. B2 - ed.)
Mayor Koch even penned a poem in honor of the occasion. It read:
Water, water, everywhere
Atlantic and Pacific
But New York City's got them beat
Our aqua is terrific!
It doesn't really come from grapes
In fact it comes from rain
But when New Yorkers turn the tap
Out pours pure champagne!
We accept your daring challenger, sir
But you will change your tune
When New York City draws its drink
In Dallas at high noon
8 April 1990, New York Times, pg. B6:
New York City is taking measures to protect its upstate water supply system, which has given the city what Mayor David N. Dinkins describes as "the champagne of municipal water."
31 April 1997, New York Times, pg. 1:
And while all involved emphasize that there are no health problems today with the flow of what a succession of New York City mayors have called "the champagne of drinking water," the problems are mounting.
9 July 2000, New York Times, pg. WE14:
The city's daisy chain of upstate streams and reservoirs acted as a vast filter, cleansing the water as it flowed through forests and tributaries into the aqueducts that supply what a succession of mayors have called "the champagne of city water."