While the meatballs bake, heat the olive oil in a Dutch oven or large skillet over medium heat. Add the onion and cook until soft, about 5 minutes. Add the garlic and tomato paste; cook and stir for 1 minute. Stir in the crushed tomatoes, tomato sauce, water, brown sugar, parsley, basil, salt, Italian seasoning, and pepper. Bring to a boil. Reduce the heat to low and simmer, uncovered, until slightly thickened, about 10 to 15 minutes. Taste and season with additional salt, pepper, or sugar if needed.