Thanks to the Snowflake tourney I just learned that you can construct defense towers in the water!
This seems like a bug because not only does it look funny but it doesn't make any sense that units with the construct ability would be able to build towers in the middle of the ocean.
There is also a game balance issue here too because of the way Ports are handled. If you build a tower on the port (which you can do) it will be almost impossible for land units to attack and defeat your tower since they are force to fight at 15 strength because the game doesn't allow you to convert to better boats.
KGB