It is the place where it downloads it before moving it to the KFGame/Cache folder. This way if you delete your cache folder, if the mod was already downloaded and is still up to date, it does not download the files again.
I do not know why you do not have a KFGame/Cache folder in your server folder. Maybe because you have a server on the same computer you use to play, it shares the workshop cache folder in My Games, but in my opinion that would be a really bad move from TWI.. I don't think server on a player computer should use the player files, but his own folder, it is a dedicated server not a listen server.
Try to stop the server, delete the folders APPCACHE DEPOTCACHE and STEAMAPPS you find in Binaries/Win64/ then RENAME your folder "\Documents\My Games\KillingFloor2\" to "KillingFloor2 DO NOT DELETE" (yes, DO NOT DELETE THIS FOLDER
, just rename it for the test). Then start server, and check the console, wait a few minutes and see if it downloads, also check if a new KillingFloor2 folder is created in My Games, and check the (new) My Games/KillingFloor2/KFGame/Cache/ folder to see if it downloads here (do not start the game, only server).
You can see if anything has changed. Does server download work? does it create (and so surely use) a folder in My Games?
When tests are finished, close server, delete the newly created (if so) \Documents\My Games\KillingFloor2\ folder and rename back the folder "KillingFloor2 DO NOT DELETE" to "KillingFloor2"
I can't help more, as I have 0 experience in managing a server on my own computer.