The town isn't that different than any other modern city. It's the characters that make it so unique. It's never strictly explained where on Earth the series occurs. It's left open. Similar to most fairy-tale cities.
Otogi Academy is the main setting and school for the events of the anime. It's here that the Otogi Bank is based. They are a group of students who basically are hired to help students fix any problem. Whether it be through planning, negotiations, or violence.
They are located in a small, out-of-the-way club house in the school. The formal name of the club house is Otogi Academy Mutual Student Aid Association (御伽学園学生相互扶助協会). The Otogi Bank for short. It was created by the school's head master, Ranpu Aragami. While the inside looks about as spectacular as the outside. It holds a rather amazing secret. Past a secret entrance, there is a staircase that takes you below the school and to a rather lavish office room, where the real business of the club takes place.
The name for Otogibana City (otogibana-shi) comes from the Japanese word "otogibanashi (お伽話)", which means fairy-tale. It's a clever twist since "shi(市)" can also mean "city" in Japanese. It's an appropriate setting for a story based on fairy-tale characters.