(Recasts with city council vote to restore control of city to elected officials, keep emergency manager in control of bankruptcy case, statement from Michigan governor)

By Lisa Lambert

DETROIT, Sept 25 (Reuters) - The Detroit City Council unanimously approved a resolution on Thursday that would keep a state-appointed emergency manager in control of the city's historic bankruptcy case, while returning city governing powers to elected officials.

Shortly after the vote, Mayor Mike Duggan signed a letter, informing Michigan Governor Rick Snyder of his approval of the action, which followed three days of closed-door meetings.

Kevyn Orr, who was chosen by Snyder in March 2013 for an 18-month appointment as emergency manager, will maintain responsibility for the city's historic bankruptcy in order to "successfully achieve confirmation and implementation" of Detroit's plan to adjust $18 billion of debt and obligations, according to the resolution.

"It changes a huge amount for me as well as for the city council," said Duggan at a news conference following the vote. "While I have certainly been working on a cooperative basis, I did report directly to the emergency manager. And, while I had a good professional relationship with Mr. Orr, every single action I took was still subject to his approval."

On Thursday night, Orr also signed an order reflecting the new delegation of powers.

"There was so much work done before I even got here that I view this as just a bridge and the close-out of a process that started a year and a half before I came," Orr said after the signing. "We'll know where we are a year or two from now, and whether it was worth it."

The governor said in a statement that Orr's "expertise and counsel to the mayor and city council are vital in guiding the city toward a successful conclusion of the bankruptcy process."

City officials also said Orr had to be retained as emergency manager to satisfy a condition of a $120 million loan from Barclays that required Detroit to have an emergency manager until the loan is retired. Detroit last month said Barclays agreed to raise up to $275 million to fund its bankruptcy exit, with part earmarked to retire the previous loan.

Orr, a former corporate bankruptcy attorney at law firm Jones Day, famously took Michigan's biggest city to bankruptcy court in July 2013. He crafted, with the help of a slew of lawyers and consultants, a now 1,111-page blueprint for the city to deal with debts and invest in its future.

U.S. Bankruptcy Court Judge Steven Rhodes is currently holding a trial to approve the plan. He put the trial on hold starting Sept. 19 to allow Financial Guaranty Insurance Co, the last major holdout creditor in the case, time to rework its objections after another large creditor, Syncora Guarantee Inc., reached an 11th hour deal with the city.

Orr also said he does not have the authority to make any more deals using city assets, and he expects the trial, which resumes on Monday, to last one or two more weeks.

Over the last 14 months, Orr has pushed for a quick resolution of the complex and sometimes testy proceeding, knowing the city's elected leaders were anxious to use a provision in a 2012 Michigan law to remove him after 18 months.

The Local Fiscal Stability and Choice Act allowed for the installation of state-appointed managers in financially ailing cities and school districts, boosted their powers and provided an avenue for municipal bankruptcy filings.

His speed raised concerns that the city may have been shortchanged in creditor settlements and other terms of the restructuring.

By contrast, the bankruptcy case of Stockton, California, filed in June 2102 is still ongoing.

(Reporting by Karen Pierog and Lisa Lambert; Editing by David Greising and Ken Wills)