After opening its newly renovated building to much fanfare in October, Arthouse, the Congress Avenue contemporary arts center, is facing its first problems. An important staff position has been eliminated, another staff member quit in protest, and some artists are complaining about the treatment of their work.

Citing the need to cut its annual budget, Arthouse said Monday that it had eliminated the position of associate director/curator and that Elizabeth Dunbar, who had held the post, was no longer an employee.

But that action led another Arthouse employee to quit. Jenn Gardner, who had been with the organization for 10 years, resigned Monday.

"I strongly disagreed with the concept of Arthouse existing without a full-time curator," Gardner said.

Dunbar, who joined Arthouse in 2007, declined to comment.

Arthouse Executive Director Sue Graze said in a statement that in-house curatorial responsibilities would be handled by guest curators.

"Our newly revised, board-approved operating budget incorporated reductions to our staff salary line," Graze said. "Our exhibition program will be well-sustained through a series of guest curator initiatives and significant traveling exhibitions with direct support from Arthouse's excellent staff."

The elimination of the organization's No. 2 position, and the one most directly involved with artists, comes at a critical time for Arthouse.

The $6.6 million renovation of its Congress Avenue home expanded usable space for exhibitions threefold. And since reopening, Arthouse has staged several ambitious exhibitions by internationally recognized artists. But a few of those artists say they are unhappy with the way Arthouse has handled their work.

London-based artist Graham Hudson reimagined the Astoria, a famed London rock club, creating a stage and audience area that filled the second-floor gallery. Local bands were invited to play within his massive installation, called "Rehearsal at the Astoria."

But shortly after the exhibit opened in February, Hudson said he learned that Arthouse had agreed to rent the space to Warner Music Group for a three-day promotional event during the South by Southwest Music Festival and that Arthouse had also agreed to let Warner use Hudson's installation.

The Warner event, "Six Sounds," promoted and sold the company's merchandise.

Hudson said he learned of Arthouse's rental agreement with Warner only after it was made. "I was never consulted," Hudson said in an email from London. "I was told (Warner) would be placing their merchandise on my work and (their) posters on the walls, and I thought this was grossly wrong."

Under the federal Visual Artists Rights Act of 1990, an artist holds the right to prevent modification to any artwork that would prejudice the artist's reputation, regardless of who owns the artwork.

"Like any nonprofit working in this challenging economy, we have to look at a variety of revenue sources, and during SXSW we were presented with the opportunity to earn a sizable income that would greatly help us with our mission," Graze said in an email. "Unfortunately, we made a decision that may not have been in the best interest of an artist we deeply respect, and we regret that. I look forward to working with Graham to make it right by him."

In late March, artist Michelle Handelman complained when Arthouse officials shut down viewing of her video exhibit, which has some sexual content, during Arthouse's teen programs. The action prompted the National Coalition Against Censorship to write a letter of concern to Arthouse.

jvanryzin@statesman.com; 445-3699