They also said there was not enough community support for the council's idea and if the building was ever used for something else, it would be more useful on Fox St.
South Wairarapa mayor Adrienne Staples said the letter was a surprise.
"We had been given an email as feedback saying they would support whatever site was most appropriate then to receive a letter saying that they wished to only consider Fox St was disappointing.
"Basically we couldn't proceed with the project on that basis."
"Council would have much liked to see it go ahead and we are deeply disappointed."
She said Mr Olds had a conflict of interest.
Mr Olds said he did state he was a member of the Menz Shed group at the beginning of the council meeting on Wednesday when discussions took place about the project.
Mrs Staples said council would advise Trust House it did not have a location for the Menz Shed due to concerns from the community.
Council needed to make a decision on where to put it because the trust needs to move it by the end of July to make way for the new supermarket complex.
"The Menz Shed are welcome to carry on the negotiations with Trust House," said Mrs Staples.
She said council was not prepared to fund part of the project on a different site and it needed support of the Featherston community to move forward.
The council initially asked for feedback on an idea for a town square and a Menz Shed building beside the skate park, as a starting point.
From the results, it proposed the new placement of the Menz Shed, landscaping a hard surface/town square with more consultation on the design and allocating 1300sq m for commercial development.
Councillors were recommended to approve the proposal, but Featherston Community Board chairwoman Lee Carter urged them not to make a hasty decision.
She said that the board and council hadn't discussed the 150 feedback forms and needed to do so.
"We need to step back and look at the big picture for Featherston."
Featherston resident Sue Fox said the council and board were diverging and the Menz Shed's concept was at odds with the council's.
"Why does council insist on a decision today?"
"We want an urban designer to tell us how the town centre can be made more vibrant, not just thoughts on how you can squeeze different things in that area."
Mrs Staples said the community board would now lead further public consultation for use of the area.
"If council considers there is no support for this idea, we shouldn't move with this idea."
Read more about the new concept at: www.swdc.govt.nz.
