Start fresh with new numbers and requirements.

For example, in my area garbage and sewer are the most common municipal utilities and thankfully flat fee that I can bake into the rent. 

He went out for another issue and he said yep, they were using that tub and the stink is because they put organic oils, fresh flowers and leaves, needles in the tub along with apparently oatmeal. 

There’s not many replies about starting fresh out of college.

Perhaps if they were mostly through their lease I would use the opportunity to sign a fresh lease with no increase as the solution and show them they will save $$$ over any planned increase or just give them a week's free rent or something.

The problem with asking this type of advice in a RE-centric forum is you will get a lot of bias baked into that advice. 

Being able to 1031 it into something larger would pay great dividends down the road, not to mention starting a fresh a depreciation cycle on your tax cycle. 

I've seen beautiful houses on google street view, only to get there to find fresh tilled dirt and the neighbor tells me the house burned to the ground 2-3 months ago.   

Marketing, overhead, operations, what have you, this could be baked into your rate, furthermore, your lender is most likely not even providing the capital to fund the loan nor will they service it unless they are a credit union or the type of lender that does service it.

In a situation like that I think you are doing the correct thing in billing back the tenant because the utility is based on usage and not a flat fee that you can bake into the rent price.