I agree that I wouldn't do anything that might hurt (even if not intended) the other cat as it's probably acting on instinct...water hose is a good idea. It doesn't make it easier. Honest to goodness, I have three inside cats and males from around the area will come and attack at the windows.
Have you considered making your cats inside cats and taking them out when you're with them? My ex-MIL does that.
I would talk with the cat's owners and explain if that keeps happening you may have to report it somewhere and that they may be liable for future vet bills incurred. You (and your pets) should be able to enjoy the privacy of your own yard. I know if that were a dog, the law's pretty clear. The same might apply with cats.
I'm so sorry this is happening. I would be talking with the other cat's owner(s). Also, ask your vet what your options are within the law. He/she will know alot, I'd say.
KD