To say something is used for municipal purposes is to say it is used by the local government, be it a town or a city.
“Municipal workers” is a term that could be used to describe anyone that is an employee of the local government, like a city police officer. Their police car would be a “municipal vehicle”.
There are municipal archives, societies, buildings and hospitals. A local government’s set of laws may be called the “municipal code”. This differentiates them from those that are federal or state.
An area maintained by the local government and open for public use, such as a park, may be referred to as a municipal park. The town or city the park is located in may at times be referred to as a municipality.
Municipal purposes are government purposes, specifically local government, below the state level.