Reproduced with ease. I have JBDS 7.1.0 with the same Teiid Designer as customer Teiid Designer 8.3.1.Final-v20140122-1920-B21. Created a new Model Project, new Teiid View Model, new Child Procedure and entered below[1] as SQL transformation, validate and you immediately get the error. Obviously I have no other tables with the same name so the error message is bogus. Found this jira, but supposedly fixed in teiid designer 8.1 https://issues.jboss.org/browse/TEIIDDES-1554

Looking at the documentation, the syntax is correct: https://access.redhat.com/site/documentation/en-US/Red_Hat_JBoss_Data_Virtualization/6/html/Development_Guide_Reference_Material/chap-SQL_Support.html#Temp_Tables in fact you can create a virtual procedure with the example[2] in the doc and get the same error!

[1] CREATE VIRTUAL PROCEDURE
BEGIN
CREATE LOCAL TEMPORARY TABLE MY_TEMP (MY_COL string);
END

ERROR: TEIID30118 Cannot create temporary table "MY_TEMP". An object with the same name already exists.

[2] CREATE VIRTUAL PROCEDURE
BEGIN
CREATE LOCAL TEMPORARY TABLE TEMP (a integer, b integer, c integer);
SELECT * INTO temp FROM Src1;
SELECT * INTO temp FROM Src2;
INSERT INTO temp VALUES (1, 2, 3);
SELECT a, b, c FROM Src3, temp WHERE Src3.a = temp.b;
END

ERROR: TEIID30118 Cannot create temporary table "TEMP". An object with the same name already exists.