Hello, I follow what the manufacturer makes. If the outlet from the heater is three inch, stick with that all the way. What the manufacturer calls for nearly always trumps local inspectors. If you up-size the vent too much, it loses it’s ability to vent properly. I’ve seen three inch pipe run into 12 inch pipe and it simply doesn’t work. That’s not much different than running into a brick chimney (which will be hurt by condensing, acidic flue gasses). If there is any way to switch out your new heater with another, I’d consider going with a direct vent heater. That would sidestep all the problems and help keep the indoor air a bit cleaner. Better yet would be to consider going with a heat pump unit if it can be put someplace where noise wouldn’t be a bother. Additionally, there may be incentives to go with the heat pump. I know I’ve wandered a bit from the question, but it’s not bad to know your options.