I've never heard of anyone being penalized for sponsorship links.  I mean if you think about it everything would be a paid link.  If an organization pays an employee to run white hat link building, then are those paid links because the person receives a salary? I think you are fine.  Sponsorship links are an excellent way to engage in the local community and receive a link for your efforts.

I would remove the link.  You can keep the testimonial and logo.  Removing the link will not impact your rankings.