This paper presents a hierarchical decision-making strategy for the energy management of a smart city. The proposed decision process supports the city energy manager and local policy makers in taking energy retrofit decisions on different urban sectors by an integrated, structured, and transparent management. To this aim, in the proposed decision strategy, a bilevel programming model integrates several local decision-making units, each focusing on the energy retrofit optimization of a specific urban subsystem, and a central decision unit. We solve the hierarchical decision problem by a game theoretic distributed algorithm. We apply the developed decision model to the case study of the city of Bari (Italy), where a smart city program has recently been launched.