I personally know a police dog who is definitely a one man dog and would take some serious retraining to be re-deployed with another officer.
I also know an Air Force K9 handler (Gulf War I) who retired and his dog had to be euthanized because it couldn't be retrained. (That was before the change in the law that would have allowed him to take the dog home.)
And we don't know how old this dog is, how long his remaining useful life is, or how attached he is to his handler.
So this may well be a fiscally and professionally sound decision, given this dog, its age, its personality, and its state of training. So I'll give them the benefit of the doubt.
And it's not as though there aren't new dogs being trained for the job.