Why aren't Geothermal heat pumps more common?
The technology is relatively young, and not as well known to consumers as traditional heating and cooling methods.  The upfront costs of a geothermal system are also higher, and there are fewer companies around with the knowledge and tools to install the systems. 

In the US most homes are not built by the home owners, they are built by development companies who buy large plots of land and build as many homes as cheaply as they can on them.  When they build these homes most of the products they use are "Contractor grade" (meaning cheap), so that the companies can make the maximum profit.  Because of this, the builders typically will not choose a geothermal system over a more common HVAC system if the cost of the geothermal system is higher.

As for municipalities controlling a geothermal system, again this comes down to dollars and cents.  If you were building a new city from the ground up this might make sense, but to retrofit a system like this would cost billions of dollars.  

Hopefully as the "Green" movement marches on, geothermal and other "alternative" power sources will become more popular.  And as they become more popular they will become cheaper, and the cheaper they get the more attractive they will look to average home owners and home builders.