I figured adding these too my duplex before moving tenants in will help then pay rent on time a lot better if their utilities are cheaper, But what about water,sewer,gas.

Don't give keys until it is set up.You may be on the hook for a couple days of water - but nobody is living there so who cares?

In other areas, water and even electric are sometimes provided by the municipality. 

The electricity and water have been off for a while.

I'd check with the water department.What about lawn care and snow removal?

Landlord is paying water and sewage.

I closed on my first property last June and have since had the water heater and furnace stolen, repairs over budget by about $7k to get the CoC, and now have a tenant that occasionally pays rent.

This will include all the zoning research and figure out the best way to get the most units on the property (and more importantly get the required parking).Thirdly, If the builder is saying its going to be poor cash flow this might be dead in the water already.

Annual expenses $12,200 (taxes, ins, landscaping, water/sewer, trash). 

Since you'd mentioned landscaping I assume you've taken all expenses into account (e.g. water/sewer, repairs, etc...)?