Debugging Django templates doesn't work anymore after SDK update

After upgrading to the latest Google App Engine SDK (1.7.6) I no longer have the ability to debug templates. My breakpoints are ignored and I get the following message in my console:

WARNING: Template path is not available. Please set TEMPLATE_DEBUG=True in your to make django template breakpoints working

I double checked and my still has TEMPLATE_DEBUG=True.

Anybody else experiencing the same??

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