Sounds bad but the outcome is more or less as follows, if my rather vague memory (I was in said school when it opened ;), and finding summaries of local events from the 70s on the internet is not straightforward) is accurate:
* some combination of the village's mayor and/or builder went to jail
* the village residents had to pay extra taxes to cover the overbuilt school's costs
* growing up, I had a really nice school (nice play yard, lots of classroom space, dedicated gym, swimming pool with adjustable depth so regular swimming lessons, etc)
* eventually, the population of the village increased enough that the school was actually a useful size (it's more than quadrupled, from the mid 300s to ~1600, since the 70s)
It feels like somehow the failures modes of "bad government" are less bad than they could be ("at least we got something for our corruption!").