This is straight from the Iowa DOT website.
The Iowa DOT sets regulatory speed limits on state and federal highways based on a thorough engineering and traffic investigation. These factors are considered: · road type and surface (curve, hill, etc.); · location and type of access points (intersections, entrances, etc.); · existing traffic control devices (signs, signals, etc.); · crash history; · traffic volume; · sight distances; · pedestrian activity; and · results of a field review and speed study. The most important part of the traffic investigation is the speed study. When choosing a speed, drivers take many roadway environment factors into consideration. Therefore, the speed that the majority of people consider prudent is an important value. Data is collected using a laser speed gun at selected locations on the roadway under ideal driving conditions. A technical analysis is done on the results to determine the 85th percentile. This is the value indicating the speed which most (85%) drivers are traveling at or below. Experience has shown that a posted speed limit near this value is the maximum safe and reasonable speed. Studies have shown that traveling much faster or slower than this value can increase your chance of being in a crash. Engineering judgment is an important tool. The traffic investigator must use knowledge of nationally accepted engineering and safety principles, combined with experience, to assign the safe speed.