The terrain creation tools don't work well when using elements from reference files that are reprojected from other coordinate systems. This seems to be true for many of the terrain creation tools. Some tools don't allow the elements from the reprojected reference to be selected. In other cases, when I'm able to get the terrain to create the end result is located in the wrong location (e.g. it doesn't seem to understand that the results should be reprojected).

In my situation, I'm working on a project that has a nearby project developed in another coordinate system that will be completed by the time my project starts. I'm looking to create a complex terrain of both by existing survey and the other project's proposed terrain to be used as my project's existing terrain during design.