!! SPOILER !!
You have to set it by the sandbox. I find that if I try to set it right on top of the bucket that's next to the sandbox, it sort of jumps a little to sit next to the bucket. Then, when I want my peeps to actually use it, I drop them so their circle covers a little of both. They will then pick it up and walk to that hose to put water in (it's not actually supposed to be paint like so many people on this site have said -- it's supposed to be something more like a wall mudding compound) and then carry it to the shed wall.
They won't be able to use it though if they haven't already fixed the other hose -- the one in the backyard.