Municipal IOU is a term used to describe a type of scrip, which is a document that can be exchanged for goods or services. Scrip is often issued by local governments as an alternative form of currency, and is typically used in times of economic hardship. Municipal IOUs are a form of scrip that are issued by local governments as a way to pay their debts. They are usually redeemable for goods or services, and can be used as a form of payment for taxes or other fees.