Without seeing it or comparing it to another mark I cannot give you a definite answer. However, I assume that there are other "Space Needle" designs for other services and goods in the Seattle area, right. However, unless another user has the needle logo in use with sports (specifically swimming) there may not be confusion. Further, you are not trying to make money through the use of this logo. It is simply to give the kids team identity. So, there even if it were owned by another entity in the sports industry, you could argue that it is "fair use". Your type of fair use is the classic type. It is not worth it, but if becomes a real issue, you can get a recently licensed attorney to prepare an opinion for you.
The following is not legal advice and should not be relied upon to take or refrain from taking any action.
The Seattle Space Needle image and variations of the image are federally registered trademarks owned by, guess who?, The Space Needle Corporation which, occasionally, asserts its rights in the image. The image is used as a trademark for many types of trinkets and promotional items. See .
Is it lawful for you to use the Space Needle image as part of a team logo? Your own attorney should make that call but I think the chips are stacked against you. Unlike other cases in which a building owner asserts trademark rights in the appearance of its building, the Space Needle serves no purpose other than as a attraction (with restaurant), visually appears the same from all angles, is particularly unique, and is famous throughout the country. I think it's quite likely that the Space Needle Corp. owns the exclusive right to use the image of the Space Needle as a trademark.
As far as you deflecting liability under the trademark "fair use" defense, that's very unlikely because you are, indeed, using the Space Needle image "as a mark" and not merely in a descriptive manner (the image certainly does not "describe" a swim team). It's never "fair" to use another's trademark as a trademark -- though it may sometimes be "fair" to use another's trademark if whatever it is that's being used as the trademark can also be used descriptively. BEST BUY, for example, is a registered trademark used and owned by electronics retailer Best Buy, Inc. while ACE BEST BUYS is a registered trademark used and owned by hardware retailer Ace Hardware Corp. -- Ace's use of "Best Buys" is fair because no one can exclusively appropriate the descriptive phrase "Best Buy" simply by using it as a trademark.
I may be completely wrong in this analysis because the Space Needle image was used for many years by the Seattle Supersonics as part of its team logo ( http://en.wikipedia.org/wiki/Seattle_SuperSonics ) and is now being used as part of the Seattle Founders soccer team logo ( http://www.soundersfc.com ). I have no idea if either team licensed the rights to use the Space Needle image or not. I do note that the Supersonics are no longer in Seattle and no longer use the Space Needle image as a trademark (which may have cleared the way for the Founders to license those rights).
Can your get into trouble for using the Space Needle image as part of your swim team logo? Maybe -- your own trademark attorney needs to answer that question.
OK, so how many lawyers does it take to answer a question? At least three apparently and this is a clear demonstration of why intellectual property law is not clear cut. It also is an example of why a first year lawyer might not be the best source of legal advice. I agree with Daniel that this would not likely be a fair use as it does not seem to fit into the categories of the exception to copyright law. The US Copyright Office has a website that discusses the issue if you want to take a look at it.
That you have used it for 12 years and have not heard anything about it also makes one wonder whether the copyright owners would object to your use. While lawyers cannot advise you to infringe on someone else's rights because they are not likely to hear about it or even to object about it, risk assessment is part of legal analysis. I think your swim team logo is not the type of use -even if it is infringement- that the Space Needle Corp is going to be worried about. The safe way would be to write them and ask for permission but realize that this might have them deny your use or ask for a fee for license.