I'm actually not Canadian, I just did my MLIS there. ;)
It is odd that your small towns don't have some kind of consortium agreement. There are benefits and drawbacks to having separate versus consolidated systems. Consolidated systems would, as you note, be more efficient in terms of staff costs and probably allow for materials to travel more easily. On the other hand, a consolidated system can end up only really serving the richest or largest community, rendering the rest of the population as afterthoughts.
Like from an ROI perspective, it makes sense public libraries are terrible at serving the long tail/the part of the population who want to educate themselves to a high level. Patrons are more interested in popular fiction and children's books, so that's the most bang for the buck.
But ugh on the building rationale. Without knowing what the building was like before, I can't comment too much (e.g. if there was mold/water damage/etc.) but that does seem like an odd use of funds.