An appropriate local authority should have powers, derived from law, but its powers will only be those it properly so derives. Other acts willbe ultra vires. In a federal system, there will be demarcation between state and nation - including so-called "federal pre-emption". A particular nation willhave its own peculiarities of this.
In the USA I would have expected, subject to federal pre-emption, the state, not the city, to be the source of residual sovereignty, so that the state would have to confer on smaller parts of local government the powers of those smaller parts. Thus in the UK, a parish council may make bye-laws, but only within its powers, and the byelaws may be challenged for substantive or procedural defect, as happened in the "Greenham Common" case.
So, in principle, no, I do not accept that in a democratic system the particular "municipality" has full residual law-making power. It will have to derive its law-making power from somewhere, and exercise it accordingly.
It is the same argument as saying that a constitution is logically prior to sovereignty.