Development in Auchterarder will be stopped after councillors refused plans for a £7 million offslip from the A9 at Shinafoot.
Refusing the application planning convener Ian Massie said PKC wanted to send a "clear message" to developers to fulfil obligations.
Muir Homes and Stewart Milne Group sought permission to create a single rather than dual slip road but said they did so on advice from PKC.
Council officers recommended Perth and Kinross Council's Planning and Placemaking Committee refuse the application on Wednesday, November 23.
At Wednesday's meeting several spoke of having taken "their life into their hands" crossing the A9 from the southbound carriageway into Aberuthven /Auchterarder.
But locals said forming a slip road off the southbound A9 connecting to the B8062 at Shinafoot was not the solution.
Council officers offered three reasons to refuse the project:
- The Auchterarder Expansion Townhead and Northeast Development Framework stated "the new Interchange at Shinafoot would include the provision of southbound on and off slips". (But the officers' report also said Transport Scotland - despite having set out this requirement - did not object to the application.)
- PKC's Transport Planning Team objected saying not having an onslip would increase traffic going through Auchterarder "by over 1000 vehicles and 70 HGVs" a day - "detrimental to Auchterarder’s sense of place, health and wellbeing, and active and sustainable travel methods".
- Officers said a £24,000 financial offset from the applicants compensating for the loss of trees would set "a precedent" and "fails to accord with the principles of the Scottish Government Policy on Control of Woodland Removal".
Strathallan Conservative councillor Crawford Reid told the committee there was "no support for this proposal from the local communities".
Cllr Bob Brawn asked if adding an on-ramp would make it "satisfactory" and/or where a better location would be.
Cllr Reid said: "An on-ramp would be better. It does not take away the major constraints of Shinafoot as a floodplain and the major issues with the B8062. If you ask the local community where they want it, they would want it in or around Aberuthven."
Strathallan Conservative councillor Keith Allan said the project was a "waste of time" without an onslip.
He added: "It needs to be on and off - regardless of where it is - or it does not offer a solution. It's completely the wrong proposal."
Objectors John and Doreen Cameron have lived next to the Shinafoot underpass at the Pairney Bridge on the B8602 for the past 27 years.
John said: "Part of the Pairney Bridge was almost washed away two or three years ago when we had the major flood there.
"My main concern here today is safety. We've had seven cars in our garden coming off that bridge. We're at an S-bend. You've got a narrow bridge in the middle of an S-bend.
"There are no pavements to walk on. Walkers and cyclists use this road on a regular basis."
Muir Homes and Stewart Milne Group's legal planning adviser Elaine Farquharson-Black said: "Transport Scotland wants to build a grade separated junction at Shinafoot which will enable the closures of the central reserves at the Auchterarder and Aberuthven junctions.
"But the Scottish ministers have no money to construct that junction and instead they saw an opportunity when the council said they wanted to expand Auchterarder that they would link the provision of the junction to that continued expansion."
She said there was "no obligation" on Muir Homes and Stewart Milne Group to build the junction. However, the Section 75 restricted the number of houses that could be built in the area to 389 - 338 of which have already been built - until the junction is in place.
The lawyer added: "My clients could - and if this is refused - will have to stop development in Auchterarder."
She said PKC's objection came "as a surprise" after the council assessed the impact of removing the A9 southbound merge as "small".
Ms Farquharson-Black said: "Council officers confirmed in January 2020 that the southbound merge slip road could be omitted as the modelling showed demand for its use would be small and not therefore provide value for money having regard to the environmental issues which would arise from its construction."
The developers' representatives told councillors they offered PKC £24,000 for compensatory tree planting and further funding for town centre improvements - such as an additional £100,000 crossing - in addition to over £400,000 previously contributed.
SNP councillor Ian Massie moved for refusal saying: "We - as a planning authority - will not accept inadequate payment as an alternative to developers carrying out their obligations under an agreed section 75 order to providing the transport infrastructure of a standard expected by our own Transport Planning Team."
This was approved by the committee.
An amendment from SNP councillor Eric Drysdale to approve the application garnered no support.
Cllr Drysdale said: "I'm not persuaded the southbound onslip is anything like as essential as a safe ability to turn off the A9 and into the Auchterarder area."
