They are also angry the council and the Mosgiel Taieri Community Board agreed to the crossing near the busy Church St intersection without consulting them, saying a crossing is not needed, a waste of money and in a dangerous location.
The council has apologised for not consulting them and agreed to put construction on hold while the project is reviewed.
Mosgiel Motor Court owner Tony Gow said the first he knew about the crossing was when council contractors arrived on Tuesday and asked him to move a vehicle from a roadside park outside his yard so they could begin putting it in.
"I refused to do it until someone could tell me who had decided it would be a good idea and what the locals thought about it. I was shocked anyone would put a crossing here. It's absolutely ludicrous. This is a very high traffic activity area and a dangerous place for pedestrians to cross. Someone will get killed. It will be just carnage," he said on Thursday.
There was a safe crossing for pedestrians about 150m to the west, at the Factory Rd-Bush St intersection controlled by traffic lights, or about 200m to the east, where a pedestrian refuge has been constructed in the middle of the road near an entrance to Taieri College.
Traffic turning right on to Factory Rd from Church St would have limited time to react to a pedestrian crossing, Dean McAlwee, from Mosgiel Mobil, said.
"It is already congested enough in this area. A crossing will only add to that."
The idea was "dumb", he said.
"It's a no-brainer, I would have thought. Forget about the crossing and save the money or spend it on something else."
PGG Wrightson manager Chris Bayne said there were "dozens of cars and a thousand school kids" on Factory Rd when the Taieri College day finished and she was concerned motorists would not see pedestrians using a crossing.
The loss of parks would make it difficult for her customers and freight delivery trucks, she said.
Mr Gow said he understood 10 car parks would be lost, five on each side of the road.
However, council projects engineer Evan Matheson said yesterday four parks would go, two on each side of the road.
Asked who decided the crossing was needed, Mr Matheson said it had been flagged by the community board about 12 months ago as something that should be considered and was endorsed by a council traffic engineer.
Design work had cost $2500, with another $20,600 budgeted for construction. He apologised for the lack of consultation, saying it had "slipped through the cracks".
"We put our hands up about that. People should be consulted - no argument."
The work had been put on hold and a review of the project would take place over the next two to three weeks, he said. If the recommendation was to proceed, the council would talk to the community board and neighbours.
Community board member Brian Miller, who visited the site this week and spoke to business people, said he was concerned the board had not formally discussed the crossing or its location.
Mr Miller was elected to the board in October and the issue predated that, board chairman Bill Feather said.
The board had lobbied for a crossing on Factory Rd after it was pointed out there was no crossing along its length suitable for sight impaired and disabled people apart from the Factory Rd-Bush Rd lights.
Some board members had met council traffic engineers in May to discuss possible locations for the crossing but the board had not formally discussed the spot the engineers had selected, he said.
"In hindsight, discussing that with the full board would have aided communication."
Mr Feather said he was surprised to hear contractors had begun installing the crossing and had expected council staff would have at least informed nearby residents and businesses first.
