From elearningyellowpages.com:

The fun, educational opportunities awaiting you in virtual worlds isn’t just limited to adults. Parents may be concerned about the safety and security of their children online, so here are 25 safe places for kids to play online. Kid-friendly and kid-only virtual worlds are available in almost every niche, from fashion to pirates to sports. Read on for more of these safe, fun and educational virtual worlds for kids and teens.

Younger kids will enjoy losing themselves in virtual worlds that feature pirate ships, adventure worlds, the Wild West, and more.

1. Tootsville: Customize your little Toot, kind of like an avatar, to make friends, play games, shop and more.
2. Neopets: Neopets is an internationally-used virtual world and game site for kids. The world of Neopia has updates on "world events," features a Neopian pound, and more.
3. Puzzle Pirates: Kids can learn strategy, meet friends, find sunken treasure and do other pirate-y things in this virtual world. Pirate ships are full of other players to work and play with and battle other ships.
4. Bang! Howdy: Bang! Howdy is a "fast-paced tactical strategy" platform that features worlds like Frontier Town and Indian Trading Post for kids to play games, meet friends, and develop critical thinking skills.

…

Source

From gamepolitics.com (via slashdot.org):

Well, it’s not quite like that, but the City of Decatur, Georgia is evaluating the use of a virtual world interface to "encourage community networking, improve civic engagement, and promote economic development."

The project even has a name: Virtual Decatur.

A website devoted to Virtual Decatur references Second Life and World of Warcraft, although not necessarily as models. From the site:

Virtual Decatur will provide an environment in which residents, businesses, institutions and visitors can interact and connect…  it is it is imperative that the project go beyond the features of traditional virtual environments.  The overarching purpose of this project is to allow users to interact with the City in new and innovative ways that are not possible in the real world.

Source