ATLANTIC CITY - In recent years, new supermarkets have been crowding the wealthier suburbs while poor, inner-city neighborhoods have been starving for grocery stores.

But New Jersey is starting a program that combines private investment with public funding to encourage food companies to build new supermarkets or renovate deteriorated ones in distressed communities.

The Casino Reinvestment Development Authority gave the program preliminary approval Tuesday, the first step in what will be a $7 million contribution from the state agency funded by Atlantic City's gaming industry.

Of the CRDA's funding, $5 million will go for supermarkets in northern New Jersey and $2 million for the southern half of the state. CRDA's contribution will be combined with $4 million from the New Jersey Economic Development Authority and $7 million in private funding from TRF, a Philadelphia-based investment group.

Supermarkets generate jobs, serve as a catalyst for economic development and provide access to food at affordable prices, said Odis Jones, director of urban development for the Economic Development Authority.

Donald Hinkle-Brown, president of lending and community investment at TRF, said New Jersey will be the second state behind Pennsylvania to have such a supermarket program. TRF has leveraged $30 million in state funding from Pennsylvania for $116 million of total investment for 70 grocery stores in the Keystone State.

New Jersey's program will offer low-interest loans to supermarket operators.

Although no sites have been selected yet, the cities of Camden, Newark, Paterson, East Orange, New Brunswick and Deptford Township are high-priority areas for new food markets to serve the poor, Hinkle-Brown said.

A proposed supermarket in Atlantic City will move on a separate track, outside of the state program, because it is further along.

"That horse has been let out of the barn already, so to speak," Atlantic City Mayor Lorenzo Langford said. "We're so far ahead that they wouldn't be able to catch up to us with our project."

Atlantic City and the CRDA are negotiating an agreement with A&P to bring one of the chain's Food Basics stores to a vacant building once occupied by an IGA supermarket. IGA closed its doors in 2006 at the Renaissance Plaza shopping center at Kentucky and Atlantic avenues.

The city is discussing tax abatements as a financial incentive for A&P, the mayor said. As an extra incentive, the CRDA may offer A&P a mortgage abatement of up to $100,000, said Thomas D. Carver, the authority's executive director.

Separate from the A&P deal, Langford's administration is talking to would-be developers for another supermarket at the former Abbott's Dairy Co. site at Route 30 and Dr. Martin Luther King Jr. Boulevard.

For now, Atlantic City residents are forced to shop at small food stores in town or at supermarkets in surrounding communities. Atlantic City isn't alone in not having a supermarket. Camden is another New Jersey city that lacks a major food market, Hinkle-Brown said.

Supermarket operators have been expanding to the suburbs in recent years to take advantage of wealthier customers, he explained.

"There is the assumption that poor people pay less, so supermarket companies go to the suburbs," he said.

He blamed the exodus of supermarket chains from urban areas on certain risk factors, including crime, poverty and the high insurance costs to operate an inner-city business. He said some of the risks are exaggerated.